Tarapore on

Banking Committees - Summary

Year Chairman Issue covered
1929 B N Mitra Central Banking Functions and Agr Finance
1944 DR Gadgil Agricultural finance
1945 RS Saria Agr Finance & Coop Societies
1949 Sri Purshottam Dass Agr Finance & Coop Societies
1954 AD Gorwala Study of rural finance
1964 RN Mirdha Coop Societies
1965 B Venketaiya Review of rural finance system
1968 DR Gadgil Social approach on banking review of institutional condition
1969 FKF Nariman Branch expansion programme
1969 Dehejia Financial requirement of trade & industry
1970 Chatalier Finance to small scale industry
1970 Khusro Small village and cottage industry
1970 Dandekar Regional imbalances
1970 Hathi Soiled notes
1970 BD Thakar Job criteria approach in bank loans
1971 RK Talwar Enactments at state level regarding agriculture finance
1972 GR Saria Banking under changed social and political environment
1975 Varshney Revised method for loans of Rs.2 lac or more
1985 Marathe Credit Authorisation scheme - fast track
1975 N Narsimhan Establishment of RRBs
1976 CE Kamathv Multi-institutional approach in Agr finance
1976 Dr RK Hajari Coodn between coop credit institutions
1978 NL Dantwala Viability of RRBs
1978 James Raj Systems and procedures of working in PSBs
1978 Baldev Singh Simplification of loan procedures and documentation relating to agricultural and allied activities
1978 K Madhav Das Urban Coop Banks
1978 G Luxminarayan Consortium Finance - Public/private sector
1978 Tambe Composite term loan to SSIs
1979 R K Talwar Customer service
1980 K S Krishaswami Role of banks in priority sector advances and 20 point programmes
1981 B Shivraman Establishment of NABARD
1982 Puri Uniformity of loan application
1982 S Chakravarty Review of monetary system in banking industry
1982 A Ghosh Priority sector and 20 point programme
1982 UK Sharma Review of lead bank scheme
1983 Tiwari Indl sickness and rehabilitation of sick units
1983 Pandharkar Periodical inspection by RBI
1986 Vaghul Money market
1986 G S Patel Organisation & management of stock exchange
1986 SM Kelkar RRB and its relative Acts
1987 Abid Hussain Development of capital market
1988 PD Ojha Service Area Approach
1989 SC Kalyansundaram Introduction of factoring services
1991 M N Goiporia Customer service improvement
1991 M Narasimha Financial sector reforms
1991 SA Dave Functioning of Mutual funds
1992 C Rao Agriculture policy
1992 AC Shah NBFCs
1992 Nadkarni SS Trading in public sector bonds
1992 Raja Chelliah Tax reforms
1992 Ghosh Frauds & malapractices in banks
1993 J V Shetty Consortium lending by banks
1993 PR Nayak Institutional credit to SS SSIs
1993 Goswami Indl sickness and exit policy
1993 Jilani R Credit delivery system
1993 D R Mehta Review of progress of IRDP
1995 Sodhani NRI investments in India
1995 Padmanabhan Banking supervision
1995 Shere K S Electronic funds transfer- legal issues
1997 B D Shah Stock lending scheme
1997 Tarapore Capital account convertibility
1998 M Narsimham Financial Sector reforms
1998 S L Kapoor Institutional credit to SSIs
1998 R H Khan Harmonisation of role of FIs & Banks
1998 Y V Reddy Financial aggregates system
1998 L C Gupta Financial derivatives
1999 M S Verma Measures for Weak Banks

Summary of recommendations of some of these committee:

Committee to review the working of Monetary System (Sukmoy Chakervarty 1985)

  • Need for financing the plans in a non-inflationary manner by tapping the savings of the public in greater measure than in the past, apart from realising higher savings from PSUs and improving efficiency in revenue gathering and expenditure functions.
  • Revision in the yield on dated securities and the discount rate on Treasury bills, controlled competition among banks based on an administered spread of 3% point between the maximum interest rate on deposits and the minimum lending rate of banks, positive real return of 2% p.a. to savers, rationalisation of concessional interest rates.
  • Ceiling on inter-bank call money should be removed and call money market broad based by permitting more players.
  • Need for stricter credit discipline, reduction in importance of cash credit and greater resort to financing of working capital through loans and bills, bills financing should attract inter 2% below the minimum lending rate, large units should be asked to pay interest on delayed payment.
  • RBI should take measures to develop an efficient money market.

    Committee on organisation and management of Stock exchanges (G S Patel - 1986):

  • Rationalisation of rates of under-writing commission brokerage and managing brokers remuneration.
  • Inviting applications for securities from the public for a minimum amount of Rs.1000 with a minimum allotment of 100 shares of Rs.10 each.
  • Reduction in minimum no. of days for keeping open the subscription to public offer of securities from three days to four days.
  • Laying down the code of conduct for the members of Stock Exchanges and their clients.
  • Creation of Customers’ Protection Fund in stock exchanges.
  • Providing of insurance cover for members of stock exchanges.
  • Adoption of uniform model for organisation of stock exchanges.
  • Broad basing the Governing bodies of Stock exchanges.
  • Establishment of an apex body and increase in the membership of stock exchanges.

    Working Group on money market (V N Vaghul - 1987):

    To provide an equilibrating mechanism for evening out short term surpluses / deficits to provide a focal point for Central Bank intervention to influence liquidity and to provide reasonable access to those in need of short-term funds, the working group suggested following:

  • Freeing the both inter-bank call rate and rates for term deposits / loans from the ceiling rates.
  • Phased increase in proportion of bill acceptances to total credit purchases to 75%, Govt. to direct departmental undertakings and PSUs to make payment for credit purchases only in the form of bills, with penal interest for failure to pay on due date.
  • Banks should gradually move away from receivables financing to bill financing, particularly the CAS borrowers, gradual reduction of working capital facilities against book debts to 25% by 1990.
  • Issuance of commercial paper by A rated companies, listed on stock exchanges, having good dividend payment record, setting up or a credit rating agency.
  • Coupon rates should be freely determined by market considerations, frequent auctions of 182 days treasury bills.
  • Re-introduction of inter-bank participation certificates to even out short term liquidity.

    Working Group on Development of Capital Market (Abid Hussain 1987):

  • Some of the major profit making PSUs should offer a portion of their share capital to the public as part of a long term strategy to not only instill a fair degree of stability in the stock exchanges but also to ensure a substantial increase in the number of listed scrips.
  • Joint sector mutual funds that combine the strength offer a portion of their share capital to the public as part of a long term strategy to not only instill a fair degree of stability in the stock exchanges but also to ensure a substantial increase in the number of listed scrips.
  • Joint sector mutual funds that combine the strength and credibility of the public sector financial institutions and professional management and competitive approach of private sector should be allowed.

    Study group on establishment of new stock exchange and guidelines relating to valuation and new instruments - MJ Pherwani - 1991):

  • Setting up of a National Stock Exchange.
  • Minimum capital requirement for entering the primary market by means of public issues to be raised from Rs.3 crore to Rs.5 crore, companies with lower capital requirement may be listed on OTC.
  • The minimum offer to the public after reservations for foreign collaborations, employee, mutual funds, market makers and other preferential allottees, should be 26% of the issued capital.
  • Credit should be mandatory for public / right issue debt instruments.
  • Close-ended pure equity schemes of mutual funds should be listed on the stock exchanges.
  • Companies with new issues to appoint a market maker at least in the regional Stock Exchange, evolve a mechanism to consolidate odd lots of its shares and securities.
  • The time limit for allotment of securities to be reduced and minimum application amount to be raised.

    Ghosh Committee on Frauds and malpractices in Banks

    The committee also known as Committee to enquire into various aspects of frauds and malpractices in Banks gave its recommendations in 1993 (accepted by RBI wef 26.6.93), the major among them being:
  • Photographs of depositors / persons authorised to operate the accounts be taken in all deposit accounts - whether resident / including non-resident, fixed deposits, recurring deposits etc.
  • Photograph need not be obtained in borrowal accounts like credit or overdraft etc.
  • Normally bank should not take more than 2 copies of photograph.
  • Only one set of photographs be taken for all category of accounts in respect of depositor.
  • In case of deposits in the name of minor, guardian’s photograph be taken.
  • Saving account with non-cheque facility and term deposits accounts upto Rs.10000 are exempted from requirement of obtaining photographs.
  • Banks to nominate a senior level officer as Compliance Officer who should ensure and report that various items of work in different departments are carried out strictly in accordance with systems and procedures laid down by the bank. He should also ensure that all RBI/Board instructions are meticulously observed.
  • Banks should provide desk cards for different type of work to help employees understand and observe their duties.
  • Concurrent audit should be introduced in very large and exceptionally large branches.
  • Cash and other valuables must be kept in joint custody. Currency chest transactions should be reported to RBI on the same day.
  • No official should exceed his delegated authority except in very emergent circumstances.
  • Cash should not be received other than in the cash department and cashier should not be allowed to make entries in the pass book.

    Expert Group on foreign exchange markets - Sodhani Committee - June 95

  • banks may be permitted to decide open position limit subject to their marketing capital to the extent of 5% of the open exposure limit. The current cap of 15 crore on open exchange position may be withdrawn.
  • Banks may be permitted to fix their own gap limits based on capital, risk bearing capacity etc.
  • Banks should have freedom to determine interest rates and maturity period of FCNR-B deposits subject to a cap put in place by RBI.
  • Exporters should be subject to liquidation of outstanding advances, be permitted to retain 100% of export earnings in foreign currency in India.
  • Corporates be permitted to cancel or re-book option contracts and hedge any genuine contingent exposure using options.
  • All market participants should put in place, risk management policies and internal control systems before being allowed to transact in forex and interest rate derivative products.
  • Proper disclosure of interest rate and forex risk should be made in financial statements.

    Committee on Technological Issues - WS Saraf - Dec 1994

  • An electronic funds transfer system be set up - BANKNET communication network may be used for the purpose.
  • Steps be taken by RBI to enact a suitable legislation on the lines of Electronic Funds Transfer Act 1978 in USA and Data Protection Act 1984 in UK.
  • RBI may explore the feasibility of using NICNET for electronic reporting of currency chest transactions.
  • Funds settlement in respect of Govt. transactions may be delinked from submission of scrolls and documents to PAO of Govt. deptt. Funds settlement to take place in a prescribed time frame ensuring at T+1 system.
  • Electronic clearing service be introduced to effect repetitive low value transactions like interest, dividend, refund orders, salary, pension etc.
  • Bills payment system to introduce to enable customers of utility services to pay bills by debt to their accounts in banks.
  • Cheque transaction system should introduced initially for Intra-bank cheques of value upto Rs.5000. In due course, it may be extended to Inter-bank in

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